Guidance Document: Recording and reporting of suspicious transactions for controlled substances and precursors (CS-GD-025)

Effective Date: 2019/12/09

Foreword

Guidance documents are meant to provide assistance to industry and health care professionals on how to comply with governing statutes and regulations. Guidance documents also provide assistance to staff on how Health Canada mandates and objectives should be implemented in a manner that is fair, consistent, and effective.

Guidance documents are administrative instruments not having force of law and, as such, allow for flexibility in approach. Alternate approaches to the principles and practices described in this document may be acceptable provided they are supported by adequate justification. Alternate approaches should be discussed in advance with the relevant program area to avoid the possible finding that applicable statutory or regulatory requirements have not been met.

As a corollary to the above, it is equally important to note that Health Canada reserves the right to request information or material, or define conditions not specifically described in this document, Health Canada is committed to ensuring that such requests are justifiable and that decisions are clearly documented.

Table of Contents

• 1. Introduction
  • 1.1 Purpose/Overview
  • 1.2 Scope and application
  • 1.3 Regulations governing the recording and reporting of suspicious transactions
  • 1.4 Background
• 2. What is a suspicious transaction?
• 3. Suspicious transaction reporting
• 4. Instructions for completing the Suspicious Transaction Report
  • 4.1 Administrative information
  • 4.2 List of controlled substances or precursors involved in the suspicious transaction
  • 4.3 Detailed description
• 5. Submission of the completed form
• Appendices
  • Appendix A- Definitions
  • Appendix B - Indicators of Suspicious Activities

1. Introduction

1.1 Purpose/Overview

This guidance document provides direction to licensed dealers and registered dealers on how to complete a Suspicious Transaction Report for any controlled substances as listed in Schedule I to Schedule V of the Controlled Drugs and Substances Act (CDSA).

Licensed dealers of controlled substances must notify the Minister of any suspicious transactions in accordance with the relevant regulations. Notifications must be submitted to Health Canada, Office of Controlled Substances (OCS), using the Suspicious Transaction Report form for Controlled Substances and Precursors (CS-FRM-093).

With respect to chemical precursors, licensed dealers and registered dealers are required to record (but not necessarily report) any suspicious transaction. Should there be any such record, reporting of these transactions to Health Canada on a voluntary basis is encouraged using the Suspicious Transactions Report form.

The regulatory requirements described in this guidance document are intended to operate in parallel with existing reporting requirements to other government departments.

1.2 Scope and application

This document was developed to provide guidance to licensed dealers of controlled substances and Class A precursors, and registered dealers of Class B precursors, in meeting the regulatory requirements for recording and reporting suspicious transactions for controlled substances and chemical precursors.

1.3 Regulations governing the recording and reporting of suspicious transactions

Controlled substances:

• Narcotic Control Regulations; s.27.3 and s.27.4
• Part G of the Food and Drug Regulations (Controlled Drugs); s.G.02.065 and section G.02.066
• Part J of the Food and Drug Regulations (Restricted Drugs); s.J.01.069 and s. J.01.070
• Benzodiazepines and Other Targeted Substances Regulations; s.35.3 and s.35.4

Precursors:

• Precursor Control Regulations; s.86

1.4 Background

As a regulatory body, Health Canada plays an important role in ensuring that activities with controlled substances and precursors are conducted in accordance with the CDSA and applicable regulations thereunder. Health Canada uses multiple avenues to accomplish that task, particularly through the administration of legislation and regulations governing activities such as the possession, import, export, production, and sale or provision of substances listed in the schedules of the CDSA.

Canada is a signatory to the Single Convention on Narcotic Drugs, 1961, the Convention on Psychotropic Substances, 1971, and the Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988, and is obligated to implement resolutions adopted by the United Nations Commission on Narcotic Drugs. One of the objectives of the international drug control framework is to prevent the diversion of controlled substances and precursors to the illegal market. Collecting information from licensed dealers regarding suspicious transactions is one way in which Health Canada can verify compliance with the regulations for the purpose of protecting public health and maintaining public safety, including preventing the diversion of substances to the illegal market.

2. What is a suspicious transaction?

A suspicious transaction is a transaction occurring during the course of activities of a licensed dealer or registered dealer that creates reasonable grounds to suspect that the transaction may be related to the diversion of a controlled substance or precursor to an illegal market or use. Licensed and registered dealers must assess the particular facts of each transaction to determine whether they have reasonable grounds to suspect that the transaction may relate to the diversion of a substance to an illegal market or use. To assist in making that assessment, please refer to Appendix B of this document.

Note that a transaction does not need to be completed (e.g. no transfer of goods) to be considered as suspicious.

3. Suspicious transaction reporting

Licensed and registered dealers have a regulatory responsibility to ensure the products they are distributing are not being diverted to an illegal market or use.

Once an employee of a licensed dealer becomes aware of a suspicious transaction with a controlled substance, Health Canada must be informed within 72 hours. If a suspicious transaction with a precursor has occurred, a Suspicious Transaction Report form may also be completed and submitted to Health Canada, although reporting is voluntary.

An individual can report a suspicious transaction to Health Canada on behalf of the licensed or registered dealer.

A Suspicious Transaction Report form must be submitted for each suspicious transaction that occurs, including repeat orders from the same customer.

Furthermore, it should be noted that records of suspicious transactions are subject to retention requirements, and may be requested during an on-site inspection by Health Canada inspectors.

4. Instructions for completing the Suspicious Transaction Report

Reports of any suspicious transactions for controlled substances or precursors must be submitted to Health Canada using the Suspicious Transaction Reporting Form for Controlled Substances and Precursors .

The online fillable form can be saved and must be emailed to hc.compliance-conformite.sc@canada.ca.

4.1 Administrative information

The administrative information listed below must be entered within the form:

• the name of the licensed or registered dealer that is reporting the suspicious transaction;
• the name of the person reporting the suspicious transaction;
• the title/position of the person reporting the suspicious transaction if the licensed dealer is a corporation;
• the official municipal address and phone number of the licensed or registered dealer;
• the name of the other party to the transaction (can be a company name or the name of a person depending on the situation);
• the official municipal address and phone number of the other party to the transaction;
• the date and time (using the 24 hour clock) at which the suspicious transaction occurred;
• the date of discovery; and
• the type of transaction (e.g. provide, sale, return).

Providing the administrative information listed below within the form is optional:

• the licence number of the licensed or registered dealer;
• the licence number of the other party to the transaction (if available); and
• the Canada Revenue Agency Business Number of the licensed or registered dealer reporting (if applicable).

4.2 List of controlled substances or precursors involved in the suspicious transaction

The individual reporting the transaction must ensure the following information is indicated regarding the controlled substances or precursors involved in the suspicious transaction:

• the complete name of the substance as listed on their licence;
• the complete brand name (no acronyms) of the product containing the substance, if applicable;
• for pure substances/ raw materials, the weight in mg, g or kg, or the volume in mL or L;
• for a drug in dosage form, the strength and dosage form (e.g., tablets, capsules, gels, injectables, liquid, powders, patches, suppositories, drops, topical creams etc.);
• the exact quantity of the substance expressed in:
  • number of units for solid oral dosage forms and patches,
  • total weight for powder dosage forms in mg, g or kg (as applicable),
  • total volume for liquid dosage forms in mL or L (as applicable);
• the drug identification number (DIN), if applicable.

If there is not sufficient space on the form to report all substances/products, this information can be provided on additional sheets.

4.3 Detailed description

The person reporting the transaction must also include a detailed description of the reasons for their suspicions relating to the transaction they are reporting. For a list of indicators of suspicious activities please refer to Appendix B of this document.

5. Submission of the completed form

The Suspicious Transaction Report (CS-FRM-093) and any attachments should be emailed to hc.compliance-conformite.sc@canada.ca.

You are reminded that the suspicious transactions involving controlled substances must be reported to Health Canada by the licensed dealer within 72 hours of becoming aware of the transaction.

Contact Information for the Office of Controlled Substances:

Compliance and Monitoring Division
Office of Controlled Substances
Health Canada
150 Tunney's Pasture Driveway
AL 0300B
Ottawa ON K1A0K9
Tel: 613-952-2177

Appendices

Appendix A- Definitions

Controlled drug - a controlled substance included in the Schedule related to Section G of the Food and Drug Regulations, or a product or compound that contains the substance.

Licensed dealer - the holder of a licence.

Minister - means the Minister of Health.

Narcotic - any substance set out in the schedule of the Narcotic Control Regulations or anything that contains the substance.

Precursor - a substance included in Schedule VI to the Controlled Drugs and Substances Act

Registered dealer - means the holder of a registration certificate under the Precursor Control Regulations.

Restricted drug - a controlled substance included in the Schedule related to section J of the Food and Drug Regulations, or a product or compound that contains the substance.

Targeted substance - a controlled substance included in Schedule 1 of the Benzodiazepines and Other Targeted Substances Regulations, or a product or compound that contains the substance.

Appendix B - Indicators of Suspicious Activities

There may be legitimate explanations for a purchase that includes one or more of these factors. Licensed and registered dealers will need to assess whether the transaction meets the threshold of reasonable grounds to suspect that it may be related to the diversion of a controlled substance or precursor to an illegal market or use. This list is presented solely as a guide to assist licensed and registered dealers and their employees to identify transactions that may be suspicious. This list is not exhaustive and licensed and registered dealers are encouraged to examine the totality of the evidence before them to determine whether or not a transaction qualifies as suspicious.

1. The customer:
   • Identity of customer cannot be verified.
   • A retail customer who does not have a retail or online presence.
   • Reluctance or failure to provide key information (i.e., business stationery, telephone number, physical address, federal or provincial tax numbers).
   • Reluctance to supply a written order or complete a company contact information sheet.
   • Orders for unknown companies which cannot be traced.
   • Orders for companies unable to provide usual business references.
   • In the case of dealings with long-standing customer, any suspicious departure from the pattern of the prior dealings (e.g., larger or more frequent orders without justification).
2. Payment:
   • Willingness/offering to pay a higher price in exchange for confidentiality.
   • Cash payment, even for larger purchases.
   • Freight costs higher than value of the chemical(s) ordered.
   • Unusual requests for alternative methods of payment.
3. Shipment/ Transportation:
   • Exports to countries where there are no manufacturing requirements for the products ordered.
   • Deliveries to or routes of delivery through non-traditional countries of shipment or transshipment.
   • Using a private residence or PO box number as the address from which the order is made.
   • A sudden change in delivery address for a known customer without explanation, particularly if the change is from the company address to a specific individual's address
   • Pick up or delivery of products by personal transportation or unusual modes of transportation such as air freight.
4. Business practices:
   • Requesting small packages even if indicated for industrial use.
   • Requesting neutral or no labels to be used.
   • Indications of intended use not consistent with the products ordered.
   • Size of order or repetitive orders for an amount of products is not consistent with the intended use or size of the company purchasing the products (e.g. order volumes for retailers which are substantially higher than other retail customers with comparable store sizes).
   • Increase in quantity and frequency of orders.
   • States the item is being purchased for industrial odour control.
   • Unusual quantities of other products ordered or irregular ordering and quantities without explanation.